101 Wis. 2d 612 304 N.W.2d 780

Michael Martino and McDonald’s Drive-In of Manitowoc, Inc., Plaintiffs-Respondents-Petitioners, v. McDonald’s Corporation, successor in interest of McDonald’s System, Inc., an Illinois corporation, and Franchise Realty Interstate Corporation, an Illinois corporation, Defendants-Appellants.

Supreme Court

No. 80-085.

Argued March 2, 1981.

Decided April 29, 1981.

(Also reported in 304 N.W.2d 780.)

For the petitioners there was a brief by Coughlin, Herrling, Swain & MeCanna and oral argument by Dennis W. Herrling, all of Appleton.

For the defendants-appellants there was a brief by Paul H. Grimstad and Nash, Spindler, Dean & Grimstad of Manitowoc; Earl E. Pollock, Gary Senner, Louis C. Keiler and Sonnenscheim, Carlin, Nath & Rosenthal of Chicago, Illinois, Burton D. Cohen and Dianne DeGrange, of counsel, of Oak Brook, Illinois, with oral argument by Gary Senner of Chicago.

STEINMETZ, J.

The circuit court for Outagamie county (Honorable R. Thomas Cane) entered summary *613judgment in favor of plaintiffs-respondents-petitioners, Michael Martino and McDonald’s Drive-In of Manitowoc, Inc. (Martino-McDonald’s Drive-In). That court held as a matter of law that McDonald’s Corporation, defendant-appellant, had failed to comply with sec. 135.04, Stats., of the Dealership Law.1 The circuit court also entered a permanent injunction prohibiting McDonald’s Corporation from failing to renew or terminating Martino’s franchise to operate a restaurant owned by McDonald’s Corporation in Manitowoc, Wisconsin, without first meeting the requirements of sec. 135.04.

The court of appeals in an unpublished opinion reversed the trial court. The court of appeals stated the basic issue was the retroactive application of the Wisconsin Fair Dealership Law, specifically sec. 135.04, Stats., and that issue was decided in Wipperfurth v. U-Haul of Western Wis., Inc. 2 In Wipperfurth as well as in this case the court of appeals held prospective application of ch. 135 only was intended by the legislature and therefore Martino and McDonald’s Drive-In of Manitowoc *614were not entitled to the notice and good cause protections of that statute.

McDonald’s Corporation owns a restaurant in Mani-towoc which was constructed in 1959. It was initially-franchised to others than Martino for a term of 20 years. In 1962, with McDonald’s Corporation consent, the franchise agreement to operate the Manitowoc restaurant was assigned to Michael Martino, his brother Bruno (now deceased) along with Bruno’s brother-in-law, Lawrence Gatti.

The franchise agreement was to expire by its own terms on June 1, 1979. It did not contain any provision requiring McDonald’s Corporation to afford the franchisee any opportunity to cure previously identified deficiencies before terminating, nor did it contain any requirement for “good cause” for termination.

The Fair Dealership Law was originally enacted in 1973 effective April 5, 1974. The law requires a grantor give a dealer 90 days’ notice of the termination or nonre-newal of a contract, that the grantor supply a list of the deficiencies which constitute the reason for ending the relationship and that the grantor give the dealer 60 days in which to cure such deficiencies.3 Termination or nonrenewal can be done only for good cause, and if the deficiencies are cured within the allotted 60 days, the notice of termination or nonrenewal is void.

In its original form, the chapter contained a clause restricting the provision which requires good cause for termination or nonrenewal to dealership agreements “entered into after April 5, 1974.” These words were eliminated from the statute effective November 24, 1977.4

*615McDonald’s Corporation did not follow the procedure outlined by the statutes. It did, however, follow the provisions for nonrenewal described in the contract. The only renewal provision of the contract is the clause which promises “first consideration” for a five-year renewal if the grantor finds the licensee to be in “good standing” at the end of the franchise term. On March 4, 1977, the McDonald’s Corporation sent a certified letter to the petitioner describing the petitioner’s failure to upgrade his equipment and maintain good standards and declaring the company’s intention not to renew the franchise on its expiration.5 On April 26, 1979, another letter again *616informed the petitioner of the company’s intent not to renew and specifically referred petitioner to the lengthy explanation contained in the March 4 letter. It is apparent from these letters that McDonald’s decided that Martino was not in good standing and therefor not entitled to a renewal.

This court found in Wipperfurth v. U-Haul of Western Wis., Inc., 101 Wis.2d 586, 304 N.W.2d 767 (1981), the 1977 amendments to ch. 135, Stats., to the extent that they made that chapter retroactive, are unconstitutional.

The retroactive nature of those amendments in the Laws of 1977 was not a constitutional exercise of the state’s police power, but rather was beyond a reasonable doubt a violation of the constitutional prohibition against interfering with the obligations of contract.6

To force by law the renewal of a contract which was entered into for a limited term before the enactment of ch. 135, Stats., would impair the obligation of contract. Application of the dealership law to the present case would have altered the contractual relationship drastically between parties who were nearing the end of a 20-year relationship. In that contractual period the economics and techniques of the business had altered considerably. The grantor had no anticipation the law controlling the relationship would be severely changed by law at about the same time McDonald’s was terminating the grant under the existing contract.

*617It is accordingly the decision of this court that the contract at issue was validly not renewed and expired by its terms on June 1,1979.

By the Court. — The decision of the court of appeals is affirmed.

Martino v. McDonald's Corp.
101 Wis. 2d 612 304 N.W.2d 780

Case Details

Name
Martino v. McDonald's Corp.
Decision Date
Apr 29, 1981
Citations

101 Wis. 2d 612

304 N.W.2d 780

Jurisdiction
Wisconsin

References

Referencing

Nothing yet... Still searching!

Referenced By

Nothing yet... Still searching!